In a new report, analysts at Jefferies discussed the current merger and acquisition (M&A) environment. The report included a breakdown of recent deals and a list of potential buyout targets that investors should consider.
Changing M&A philosophy
M&A activity has been steadily rising in recent years, and analysts note that it is now approaching pre-crisis highs.
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However, analysts point out that the spirit of recent M&A activity is different than it was during past M&A booms. Instead of acquiring trophy assets, growth targets or sources of new revenue streams, analysts see many more companies acquiring targets with the intention of lowering operational costs.
“This is a significant change in M&A philosophy and is a recognition that global growth is unlikely to be so strong that companies need to increase capacity through greenfield expansion,” analysts explain.
Latest deals
Just last week, FedEx Corp (NYSE: FDX) announced that it was buying TNT Express in an all-cash deal that will combine the third and fourth-largest European delivery services.
This latest deal comes on the heels of several other recent blockbusters. Royal Dutch Shell Plc (NYSE: RDS-A)(NYSE: RDS-B) made a 45 billion pound sterling offer to buy BG Group and potentially form the world’s largest LNG producer. Holcim and Lafarge have a 41 billion-euro deal on the table to potentially form the world’s largest cement company. Finally, Warren Buffett played a critical role in the recent headline-grabbing Heinz/Kraft Foods Group Inc (NASDAQ: KRFT) deal.
Buyout targets
Jefferies recommends buying the following 10 potential M&A targets:
1. Arena Pharmaceuticals Inc (NASDAQ: ARNA)
2. Lexicon Pharmaceuticals Inc (NASDAQ: LXRX)
3. Seattle Genetics Inc (NASDAQ: SGEN)
4. Sangamo Biosciences Inc (NASDAQ: SGMO)
5. DHT Holdings Inc (NYSE: DHT)
6. BioScrip Inc (NASDAQ: BIOS)
7. OraSure Technologies Inc (NASDAQ: OSUR)
8. Sonus Networks Inc (NASDAQ: SONS)
9. NuVasive Inc (NASDAQ: NUVA)
10. Allscripts Healthcare Solutions Inc (NASDAQ: MDRX)
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.